Tax Reform Stays Alive With Debate In House

WASHINGTON — With Republicans heeding President Reagan's appeal to vote on tax reform this year, the House reversed an earlier decision Tuesday and began debating the issue.

A vote on a comprehensive bill drafted in the Democrat-controlled House was expected Tuesday night. Earlier the House rejected by a vote of 133 to 294 a Republican alternative package that sought to allay concerns that the Democrats' bill does not adequately address family values and economic growth.

Reagan has embraced the principle of tax reform as the domestic priority of his second term, but he disagrees with the details of the reform package shaped and approved by the House Ways and Means Committee.

Last week, in a startling development, action on tax reform was delayed indefinitely when all but 14 of the 182 House Republicans defied Reagan and helped defeat a procedural motion that would allow the issue to come to the floor.

On Monday, Reagan made an extraordinary pilgrimage to Capitol Hill in an effort to persuade Republicans to drop their opposition.

Reagan's personal lobbying paid off as 56 Republicans agreed to let the tax debate proceed. A second procedural motion was approved by a vote of 258 to 168.

Reagan maintains that passing a flawed bill in the House is preferable to sending tax reform to an untimely death. The committee's bill, he said, could be substantially changed in the Republican-controlled Senate early next year. Republicans claim that the committee's bill, largely shaped by Rep. Dan Rostenkowski, D-Ill., veers sharply from what they regard as the objective of reform -- a fair, simple revision that promotes the family and stimulates economic growth.

Rostenkowski insists that the committee bill is bipartisan because it received the votes of five of the 13 Republicans on the panel.

In urging approval of the motion that would allow debate, Rostenkowski said of the bill, ''It's the product of many hands, both Democratic and Republican . . . It is a vast improvement over present law.''

The committee bill would lower individual tax rates and nearly double the personal exemption for taxpayers who do not itemize deductions on their returns.

In addition, it would increase tax liablities for some businesses and corporations by restricting or eliminating investment tax credits and traditional write-offs.

Republicans claim that such a bill would ''deindustrialize America'' by making manufacturers non-competitive with foreign rivals.

The bill would slash investment and savings, said Rep. Bill Frenzel, R- Minn., and could result in a nearly 3 percent economic decline by 1991.

Other Republicans argued that the committee bill is anti-family, in part because it does not sufficiently lower individual rates and because it does not allow all individuals to claim the proposed $2,000 deduction.

Explaining why he had changed his position of last week, Rep. Jack Kemp, R-N.Y., said he is satisfied with Reagan's personal assurance that any bill that does not address family and pro-growth concerns would be vetoed.

Besides the $2,000 exemption, the administration has expressed the hope that the package would be reshaped in the Senate to lower the highest individual rate to 35 percent, 3 percent lower than the committee's plan.

The existing top rate is 50 percent. Rostenkowski would replace the existing 14 rates with just four -- of 15 percent, 25 percent, 35 percent and 38 percent.

In rallying his troops to support the committee bill, Speaker Tip O'Neill emphasized that Republicans remain the party of big business.

The bill would establish a minimum corporate tax, O'Neill said, and it would close the loopholes that enable some corporations to avoid paying any taxes at all.

In an emotional speech recalling his 33 years of service in the House, O'Neill said of tax reform, ''We're closer to it than we've ever been before.''